The UAE continues to position itself as a regional hub for investment holding structures. With the introduction of Corporate Tax, many investors are asking:

• How are holding companies taxed in UAE?

• Do Free Zone holding companies still qualify for tax benefits?

• What is the corporate tax treatment of dividend income and capital gains?

This guide explains the UAE Investment Holding Company Tax framework and how Free Zone entities can structure their investments efficiently.

Legal Framework Under UAE Corporate Tax Law

Corporate taxation in the UAE is governed by:

Federal Decree-Law No. 47 of 2022

Under this law:

• A Free Zone company may qualify for a 0% Corporate Tax rate

• Only if it meets the conditions applicable to Qualifying Free Zone Persons (QFZP)

• And earns Qualifying Income

Investment holding activity may qualify — but only when it reflects genuine investment intent rather than active trading.

Corporate Tax Treatment of Dividend Income in UAE

One of the key advantages of structuring through a Free Zone holding company is the potential favorable treatment of:

• Dividend income

• Capital gains from sale of shares

• Strategic equity participation

For a Free Zone entity, dividend income derived from qualifying shareholdings may fall within tax-exempt categories — provided regulatory conditions are satisfied.

This makes the UAE a preferred jurisdiction for:

• Regional holding companies

• Group consolidation structures

• Family offices

• International investors

Capital Gains Tax UAE Corporate – How It Applies

A common misconception is that short holding periods automatically trigger trading classification.

However, classification depends on:

• Business objective

• Frequency of transactions

• Commercial substance

• Documented investment strategy

If the intention at acquisition was long-term investment, gains may still be treated as investment income rather than trading income.